According to a report by Xinhua News Agency, China’s Ministry of Public Security has urged security forces in Macau and the mainland to strengthen their cooperation in cracking down on illegal money exchange businesses operating in Macau.
However, investment bank JP Morgan notes that this might have a ‘limited’ impact on gaming due to it not being a new issue.
In a memo, JP Morgan mentions that these illicit currency exchanges on/around casino floors ‘target a very specific and niche cohort of players’, and ‘hence the impact should be relatively limited – our best guess is less than 10 percent of total GGR is using these “services” at most.’
‘As almost always is the case, there will obviously be a Balloon Effect.’ After the crackdown on this kind of business, demand could and will move to other loophole areas, mitigating the actual impact.
The report also states that ‘this isn’t the first time that authorities have vowed to crack down on similar activities in Macau’, recalling that Macau took measures to end illegal UnionPay POS machines, illegal money exchanges in Zhuhai/Macau, and numerous accounts on underground banks in the Greater Bay area.
In this context, analysts note that ‘the overall tone/initiative – at least from the article – is quite similar to those that we’ve seen over the past decade.’
‘The Macau authorities have been stepping up efforts to clamp down on these money exchangers since mid last year, and this seems to us an extension of such initiatives as most of the illegal operators are from mainland China, as per the authorities,’ the group adds.
Meanwhile, the brokerage also alerts that ‘although we wouldn’t be surprised if the stocks show a negative knee-jerk reaction tomorrow, we think that many investors would feel this is “nothing really new” at this stage, and that the stock reactions could be somewhat modest and short lived.’
